NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2023 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2023 41 FINANCIAL INSTRUMENTS (CONT’D) (iv) Hedge accounting (cont’d) Net investment hedges (cont’d) The Group uses a mixture of foreign currency-denominated debt, forward exchange contracts and crosscurrency swaps as hedging instruments. When the hedging instrument is foreign currency-denominated debt, the Group assesses effectiveness by comparing past changes in the carrying amount of the debt that are attributable to a change in the spot rate with past changes in the investment in the foreign operation due to movement in spot rate (the offset method). The Group’s policy is to hedge the net investment only to the extent of the debt principal. When the hedging instrument is a forward exchange contract or cross-currency swap, the Group establishes a hedge ratio where the notional on the forward foreign exchange contract and cross-currency swap matches the carrying amount of the designated net investment. The Group ensures that the foreign currency in which the hedging instrument is denominated is the same as the functional currency of the net investment. This qualitative assessment is supplemented quantitatively using the hypothetical derivative method for the purposes of assessing hedge effectiveness. The Group assesses effectiveness by comparing past changes in the fair value of the derivative with changes in the fair value of a hypothetical derivative. The hypothetical derivative is constructed to have the same critical terms as the net investment designated as the hedged item and a fair value of zero at inception. The Group’s policy is to hedge the net investment only to the extent of the nominal amount of the foreign exchange or cross-currency swap leg of the derivative. The Group held the following instruments to hedge exposures to changes in foreign currencies: Notional amount Carrying amount – Assets/ (Liabilities) Line item in the statement of financial position where the hedging instrument is included Changes in the value of the hedging instrument recognised in OCI Hedge ineffectiveness recognised in profit or loss Line item in profit or loss that includes hedge ineffectiveness Amount reclassified from reserve to profit or loss Hedged foreign exchange rate Year of maturity $’000 $’000 $’000 $’000 Group Net investment hedges 2023 Foreign exchange risk - Borrowings to hedge net investments in foreign operations $391,020,000 equivalent (391,020) Interest-bearing borrowings 10,755 – Not applicable – Not applicable 2024 to 2026 - Cross-currency swaps to hedge net investments in foreign operations RMB500,690,000 3,098 Derivative financial assets 5,416 27 Finance income – SGD/RMB5.1715 to SGD/RMB5.3533 2026 - Foreign currency swaps to hedge net investments in foreign operations JPY25,529,000,000 1,067 Derivative financial assets 382 – Not applicable – SGD/JPY106.99 2024 2022 Foreign exchange risk - Borrowings to hedge net investments in foreign operations $347,007,000 equivalent (347,007) Interest-bearing borrowings and cash pool overdrafts (20,346) – Not applicable – Not applicable 2023 to 2024 - Cross-currency swaps to hedge net investments in foreign operations RMB74,190,000 (780) Derivative financial liabilities (450) 15 Finance income – SGD/RMB4.81 2023 FINANCIALS FINANCIALS ANNUAL REPORT 2023 CITY DEVELOPMENTS LIMITED 237 236
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